http://arstechnica.com/reviews/hardware/imac-coreduo.ars/4
How it works
When an application launches, the system looks to see if it's a Universal Binary. If not, the application is launched using Rosetta. Rosetta runs in the same thread as the application, and translates blocks of code as they come up. The translated code is then optimized, and is cached for reuse. So if an application is reusing the same piece of code, you will see a performance benefit, since the translation needs only occur once.
When Rosetta was announced, there was a lot of speculation over how well it would work. In a news post from August 2005, Hannibal wondered if it would be "usable, mostly usable, or barely usable." I'm here to tell you it's usable.
As Hannibal pointed out, Rosetta has a few advantages that earlier translation and emulation technologies lacked. First and foremost is an extra processor core. That allows the translation to run on one core while the application thread executes on the other core, meaning that the translated code will have a short distance to travel. In addition, it's integrated into the operating system, so there's no need to emulate drivers. Graphics and UI elements do redraw quickly.
Overall, I'm very impressed with Rosetta. Aside from Unreal Tournament 2K4, I've not run into a single application that was unusable on the iMac. Some were definitely slower on the Core Duo iMac than on the iMac G5. Launching typically took a bit longer, and I would usually get the dreaded spinning beachball for a couple of seconds once the application launched. Afterwards, it was smooth going.
Some tasks like Photoshop filters were definitely slower going on the Core Duo iMac than on the iMac G5. But using applications such as Microsoft Office felt so smooth that I really didn't get the feeling that there was some sort of translation at work.
For the most part, Rosetta should be more than adequate when it comes to general-purpose office apps, but for the heavy-duty stuff like Photoshop and other CPU-intensive applications, you'll notice a slowdown. Some reportedly won't launch at all, like Final Cut Pro 5 and Logic 7. I tried launching FCP 4.5 and it wouldn't run, saying that I needed an AGP card. I tried to tell it that PCIe video cards are much better, but it wouldn't listen. DVD Studio Pro 2.0.3 launched, and seemed to run fine, albeit slowly.